conchis comments on Without models - Less Wrong

14 Post author: RichardKennaway 04 May 2009 11:31AM

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Comment author: conchis 04 May 2009 12:14:56PM 8 points [-]

An employee is paid an hourly rate for however many hours he wishes to work. What will happen to the number of hours per week he works if the rate is increased?

It depends. The substitution effect says work more, the income effect says work less. The result depends on which one dominates.